Bull Radar

Style Outperformer: 

• Mid-Cap Growth unch.

Sector Outperformers:

• 1) Biotech +2.3% 2) Hospitals +1.6% 3) Steel +1.1% 

Stocks Rising on Unusual Volume: 

• AKRX, VRX, LL, ENDP and ZG

Stocks With Unusual Call Option Activity: 

• 1) ODP 2) GALE 3) LL 4) HFC 5) INFN

Stocks With Most Positive News Mentions: 

• 1) WYNN 2) Z 3) ANF 4) ORLY 5) VRX

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -20.0% Below 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 45.7% of Issues Advancing, 51.1% Declining
• 49 New 52-Week Highs, 6 New Lows
• 46.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.6%
• Vix 14.3 +3.6%
• Total Put/Call .98 +1.0%
• TRIN/Arms 1.17 +29.8%

Tuesday Watch

Evening Headlines
Bloomberg:     

• Sydney Home Values Have Biggest Quarterly Drop in Seven Years. Sydney home values fell the most in seven years in the December quarter as a regulatory crackdown amid record prices pushed up mortgage rates and sapped demand. The residential property index in Australia’s biggest city dropped 1.6 percent, the first decline in 13 quarters, according to government statistics released Tuesday. 
• China's Big Oil Might Do Something Unusual: Write Down Assets. PetroChina Co., the country’s biggest oil and gas producer, and China’s largest offshore explorer Cnooc Ltd., may write down assets following crude’s plunge, analysts say. Analysts from Macquarie Capital Securities Ltd. to Jefferies Group LLC are predicting impairments when the companies report 2015 earnings this week. PetroChina may take a charge of about 28 billion yuan ($4.3 billion), which may push it to its first ever quarterly loss, according to Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Hong. Cnooc, which undertook some asset impairments in 2014, may write down more for 2015, according to Lu Wang, an analyst at Bloomberg Intelligence.
• China Stocks Decline as Miners Retreat. Chinese stocks fell, snapping the longest winning streak since May, as commodity producers and industrial companies retreated. The Shanghai Composite Index fell 0.1 percent after the gauge closed above 3,000 for the first time in two months on Monday. Jiangxi Copper Co. and Shandong Gold Mining Co. paced losses by materials shares.
• Asian Stocks Advance as Japan Shares Jump Amid Crude Oil Gains. Asian stocks rose, led by a rally in Japan as the yen weakened and crude oil futures climbed above $41 a barrel. The MSCI Asia Pacific Index added 0.6 percent as of 9:08 a.m. in Tokyo. Japanese markets resumed trading after a holiday Monday, with the Topix index jumping 2 percent. 
• Drilling Rig Suppliers Say Oil Recovery Will Be Slower Than Expected. Leaders of the world’s largest suppliers of offshore drilling rigs and the services that go with them see the oil market recovery taking even longer than expected last year. Transocean Ltd. Chief Executive Officer Jeremy Thigpen expects it will have to wait at least another three years before his company can begin charging higher rates for offshore rigs. Schlumberger Ltd. chief Paal Kibsgaard sees the oil industry, stuck in the deepest financial crisis ever, in no rush to get rigs back online even after prices recover. Before rig owners can charge more, they must first see a boost in activity after the worst crude market crash in a generation. Transocean doesn’t expect an increase in rig leases until late next year or sometime in 2018, Thigpen said Monday in an interview at the Scotia Howard Weil Energy Conference in New Orleans. Daily rates, which have fallen by more than half over the past two years, aren’t expected to climb until 2019 or 2020, he said.
• Fed's Go-Slow Message on Rate Hikes May Get Burned by Prices. (video) Inflation may be starting to fire up and the Federal Reserve’s credibility could get burned. Just days after policy makers softened their outlook for the pace of interest-rate increases, evidence has accumulated that prices are beginning to move higher. If that trend continues, it could fray investors’ confidence that price pressures remain in check, or lead them to conclude that this is a deliberate effort by the Fed to test the 2 percent target to ensure the US economy remains durable despite weakness and deflationary forces abroad. Exhibit A: Both longer-run survey and market measures of inflation expectations are starting to recover, after dipping during the market turmoil of last the last few months.
• China Loves IPhones, Just Not Cheap Ones. Two-and-a-half years ago, Apple released a cheaper version of its high-priced smartphone that was supposed to be popular in emerging markets like China. The iPhone 5c was a failure, and Apple killed it off less than a year after it was introduced. This week, Apple is releasing the iPhone SE. Like the 5c, it’s cheaper than the marquee handset by recycling some of the previous year's tech specs. Notably, the screen (an iPhone's single most-expensive component) remains not only smaller but of lower quality than more-recent iPhones.Yet there are a few reasons why the SE will succeed in China where the 5c didn't.

Wall Street Journal:

• Ted Cruz’s Stealth Delegate Hunt. Senator’s campaign operates under-the-radar effort to prepare for contested Republican convention against Trump. Sen. Ted Cruz’s campaign has been operating an under-the-radar effort to prepare for a contested Republican convention this summer, and those moves appear to be bearing fruit in places such as this Atlanta exurb.
• Calling It Genocide Won’t Stop It. Now that it’s been labeled, how about a strategy to end the ISIS slaughter?

CNBC:

• Corporate profit ride turning into a train wreck. (video) If the stock market rally is going to continue the next couple of months, it will have to do so against an aggressively worsening profit backdrop. The corporate earnings picture is ugly and getting uglier in a hurry, with S&P 500 companies expected to post an 8.3 percent decline in first-quarter profits from the same period a year ago. While history suggests that earnings season always ends up looking better at the end than it did at the beginning, if the current trend holds up it will be the worst period since the third quarter of 2009, according to FactSet.

Zero Hedge:

• FBI "Increasingly Certain" Hillary Broke The Law, Stone-Walled By White House. 
• Misplaced Confidence In The ECB - Lessons From John Law's Mississippi Bubble.
• Domino's Unleashes Pizza-Delivery-Robot As 2 Out Of 3 Americans Expect Jobs To Be Automated. (graph)
• Soon After We Sounded The Alarm, Canada's Regulator Warns Local Banks Are Underreserved To Energy Losses. (graph)
• FBI Cancels Encryption Showdown With Apple After "3rd Party" Showed Them How To Unlock iPhone.
• Blindly Dancing At A Top: A Statistical Look At The Rally. (graph)
• IMF Politely Asks China To Explain Exactly How Large Its FX Forwards Book Is. (graph)
• Connecticut Credit Risk Spikes To Record High. (graph)
• The 7-Deadly Investing Sins. (graph)
• It's Not Over Yet - Moody's Put Deutsche Bank On Review For Downgrades. (graph)
• Stocks Edge Higher Despite Dismal Data & Hawkish Fed As Bonds & Bullion Slide. (graph)

Business Insider:

• Chinese companies are battling to buy American rivals — here's why the odds are stacked in their favor.
• Leon Cooperman just hosted a call for his investors about an impending SEC action — here is what he said.
• The biggest coal company in the world is on the verge of bankruptcy.
• Voters should be worried about Trump's promise to make a 'good deal' between Israel and Palestine.
• The oil output freeze is a huge red herring.
• This stock market rally is looking more and more like a short squeeze.
• GUNDLACH: Global markets will go into panic mode if Donald Trump wins the Republican nomination.

Hong Kong Journal:

• Shenzhen Group Bans Crowdfunding for Property Speculation. Shenzhen Internet Finance Assoc. asked member cos. to halt such financial services, citing a notice issued by the group. Notice bans offering of new crowdfunding services for property speculation.

Night Trading 

• Asian equity indices are -.50% +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 148.75 +18.0 basis points.  (new series)
• Asia Pacific Sovereign CDS Index 57.25 -3.0 basis points. 
• Bloomberg Emerging Markets Currency Index 71.66 +.01%. 
• S&P 500 futures -.06%. 
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (GIII)/.43
• (CTAS)/.95
• (XONE)/-.15
• (FIVE)/.76
• (KKD)/.21
• (NKE)/.49
• (RHT)/.47
• (SCS)/.22 

Economic Releases 
9:00 am EST

• The FHFA House Price Index MoM for January is estimated to rise +.5% versus a +.4% gain in December.

9:45 am EST

• Preliminary Markit US Manufacturing PMI for March is estimated to rise to 51.9 versus 51.3 in February.

10:00 am EST

• The Richmond Fed Manufacturing Index for March is estimated to rise to 0.0 versus -4.0 in February. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, Fed's Evans speaking, Germany IFO report, UK retail sales report, Germany ZEW Index and the US weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Yen Weakness, Biotech/Airline Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.92 -.71%

• Euro/Yen Carry Return Index 131.5 +.11%

• Emerging Markets Currency Volatility(VXY) 11.42 -.35%

• S&P 500 Implied Correlation 58.98 -.25%

• ISE Sentiment Index 97.0 -40.8%

• Total Put/Call .95 +21.79%

• NYSE Arms .93 -17.0% 

Credit Investor Angst:

• North American Investment Grade CDS Index 77.15 -9.03% (new series)

• America Energy Sector High-Yield CDS Index 1,548.0 -6.11%

• European Financial Sector CDS Index 86.88 +8.26%

• Western Europe Sovereign Debt CDS Index 25.93 -7.82%

• Asia Pacific Sovereign Debt CDS Index 56.91 -5.76%

• Emerging Market CDS Index 280.42 -6.42%
  

• iBoxx Offshore RMB China Corporate High Yield Index 126.48 +.10%

• 2-Year Swap Spread 8.5 +.25 basis point
  

• TED Spread 33.50 -2.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -21.0 -1.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.69 +.04%
• 3-Month T-Bill Yield .30% +2.0 basis points

• Yield Curve 105.0 +1.0 basis point
  

• China Import Iron Ore Spot $58.82/Metric Tonne +2.30%

• Citi US Economic Surprise Index -2.90 -2.7 points

• Citi Eurozone Economic Surprise Index -44.90 +1.0 point

• Citi Emerging Markets Economic Surprise Index -18.80 -.1 point

• 10-Year TIPS Spread 1.65% +2.0 basis points
• 42.4% chance of Fed rate hike at June 15 meeting, 50.5% chance at July 27 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +90 open in Japan 
• China A50 Futures: Indicating +55 open in China

• DAX Futures: Indicating +46 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/biotech sector longs 
  

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:   

• ECB Doing Whatever It Takes Can't Make Euro-Area Banks Lend. The European Central Bank began charging banks interest on deposits in June 2014 to encourage them to lend more to companies and consumers. It hasn’t worked. Deposits at the ECB by euro-area banks in excess of required reserves have jumped sixfold since the introduction of negative interest rates, while lending within the currency bloc has barely budged. Of the 646 billion euros ($730 billion) that banks added in assets during the period, about 85 percent has ended up as deposits at the central bank. One reason banks are paying to keep money idle is a lack of demand for loans in an economy still recovering from a double-dip recession and a sovereign-debt crisis. Another is that banks saddled with bad loans or low capital levels and those in the midst of restructuring are reluctant to increase lending. Even the ECB’s latest offer to pay banks interest on money they borrow from the central bank may not do the trick.
• Energy, Miners Drag Europe Shares Down; Bayer Rises on Deal Bets. (video) Energy producers and miners led a retreat in European stocks, while chemical companies climbed amid merger-and-acquisition speculation. Total SA dragged oil shares to the biggest drop on the Stoxx Europe 600 Index. Commodity producers snapped a three-day advance, with ArcelorMittal leading declines. BASF SE and Bayer AG led chemical stocks to the best performance on the equity gauge as Monsanto Co. was said to have explored possible deals with the two German companies. The Stoxx 600 slid 0.3 percent to 340.82 at the close of trading, after swinging between gains of as much as 0.6 percent and a loss of 0.9 percent. The volume of shares changing hands was 26 percent lower than the 30-day average.
• Lockhart Says Economy Supports Fed Rate Hike As Soon As April. Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economy is strong enough to weather another rate increase as early as next month. “There is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” he said in the text of a speech in Savannah, Georgia, on Monday. Policy makers “will reevaluate whether the real economy -- the Main Street economy -- remains on the assumed path to full employment and price stability” and “take account of the context of risks and uncertainties surrounding the outlook,” he said.
• Fed's Lacker Confident Inflation Poised to Rebound to 2% Target. Federal Reserve Bank of Richmond President Jeffrey Lacker said that inflation will rise back to the U.S. central bank’s 2 percent target once energy prices stabilize and the dollar stops advancing. “I am reasonably confident that, barring subsequent shocks, inflation will move back to the FOMC’s 2 percent objective over the medium term,” Lacker said in remarks prepared for a speech at the Banque de France in Paris Monday, referring to the policy-setting Federal Open Market Committee.
• Casino Shares Decline After Debt Rating Cut to Junk at S&P. Casino Guichard-Perrachon SA shares fell as much as 4.8 percent after the French grocer’s debt rating was cut to junk by Standard and Poor’s, increasing interest costs as short seller Carson Block attacks its accounting. The long-term debt rating was lowered by one step to BB+, the highest non-investment grade, Standard & Poor’s said in a statement Monday. The outlook is stable. S&P had said it may lower it as many as two levels. The company said the move will increase its financial costs by less than 20 million euros ($23 million), before tax and excluding planned bond buybacks. 

Wall Street Journal:

• IMF Pressing China to Disclose More Data on Currency Operations. Fund is calling on Chinese central bank to release further details about its holdings of derivatives.

Fox News:

• Romney makes robo-calls for Cruz in Arizona, Utah. (video) Mitt Romney is blasting out robo-calls on behalf of GOP presidential candidate Ted Cruz in the two Western states holding primary contests Tuesday – dismissing underdog candidate John Kasich in the process, all in the name of thwarting Donald Trump. The 2012 Republican presidential nominee has recorded calls for the Texas senator in Arizona and Utah. In them, he declares, “At this point, a vote for John Kasich is a vote for Donald Trump." “At this stage, the only way we can reach an open convention is for Senator Cruz to be successful in as many of the remaining nominating elections as possible,” Romney said on Facebook on Friday.

CNBC:

• Forget $40—it's back to $25 oil: John Kilduff. (video)
• Breaking up (banks) on Wall Street is hard to do.

Zero Hedge:

• If Hillary Isn't Indicted, The Rule Of Law & The Republic Are Dead.
• Brexit Fears Spike Cable Volatility To Record Highs. (graph)
• An Output Freeze Is Still The Big Red-Herring For Oil.
• Stocks Stumble After Lockhart Echoes Williams, Warns "Rate Hikes Justified As Early As April". (graph)
• JPMorgan(JPM) Warns "Reduce Equity Exposure... Don't Chase Crude". (video)
• Bloomberg Explains Why "Nobody Believes This Rally". (graph)
• It's Day 26 Of The Rally - Decision Time. (graph)
• Markets Will Eventually Normalize - "Over The Fed's Dead Body".
• Peak Drama: Valeant's Ex-Goldman CFO Responds, Refuses To Resign From Board, Accuses Valeant Of Smear Campaign.
• Existing Home Sales Crash Most In 6 Years: NAR Blames Slowing Economy, Bubbly Home Prices. (graph)
• A Desperate China Begged Fed For "Plunge Protection Playbook" As Its Market Crashed. (graph)
• Valeant(VRX) "Kitchen Sink": CEO Out, Ackman In, Throws Ex-Goldman CFO Under The Bus, Warns Of Potential Default.
• "A Dreaded Scenario For Oil Bulls Is Becoming A Reality" Reuters Warns: U.S. Production Is Coming Back On Line.
• January 'Bounce' Dies As Fed's National Activity Index Tumbles Back Into Contraction Near 2-Year Lows. (graph)

Business Insider:

• Here's everything Apple(AAPL) announced today. It costs $399 without a contract – a surprisingly low price for a new iPhone. 
• There are signs that China is turning against Alibaba(BABA).
• I was a prisoner of Castro’s regime — Obama’s visit to Cuba is a mistake.
• Apple(AAPL) just dropped the price of the Apple Watch — it's not an encouraging sign.
• President Obama was photographed in front of a giant Che Guevara mural during his historic visit to Cuba.

Reuters:

• Exclusive: China central bank to Fed: A little help, please? Confronted with a plunge in its stock markets last year, China's central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street's "Black Monday" crash of 1987. The request came in a July 27 email from a People's Bank of China official with a subject line: "Your urgent assistance is greatly appreciated!" In a message to a senior Fed staffer, the PBOC's New York-based chief representative for the Americas, Song Xiangyan, pointed to the day's 8.5 percent drop in Chinese stocks and said "my Governor would like to draw from your good experience."

Bear Radar

Style Underperformer:

• Mid-Cap Value +.3%.

Sector Underperformers:

• 1) Oil Tankers -4.0% 2) Gaming -1.6% 3) Homebuilders -1.1%

Stocks Falling on Unusual Volume:

• TSE, SHW, DRII, WYN, MAR, ENDP, BIS, VAC, KFY, AFFX, ROL, YY, W, WDR, AXE, BAP, JNPR, EGRX, BMRN, X, LGF, LULU, BPT, WBS and MAA

Stocks With Unusual Put Option Activity:

• 1) PYPL 2) MAR 3) AEO 4) KBH 5) STX

Stocks With Most Negative News Mentions:

• 1) X 2) INTC 3) JWN 4) PBR 5) SBUX

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume